The politicians’ wage gap: insights from German members of parliament

Abstract

Using a unique dataset of German members of parliament (MPs) this paper analyzes the politicians' wage gap (PWG). After controlling for observable characteristics as well as accounting for election probabilities and campaigning costs, we find a positive income premium for MPs which is statistically and economically significant. Our results are consistent with the citizen candidate model: The PWG amounts to 35-65% when comparing MPs to citizens in an executive position. However, it shrinks to zero when restricting the control group to top-level executives. This suggests that German politicians do not receive excessive pay when compared to senior executives.JEL Classification: D72, H11, H83, J31, J45

Moonlighting Politicians: A Survey and Research Agenda

“…This same finding does not appear to hold, however, in Germany. Peichl et al (2011) indeed show that German politicians benefit from a significant wage gap compared to a matched sample of non-politicians -with a significant part of this wage premium being driven by outside earnings. Finally, in the thus far only study of a non-Western setting, Bhavnani (2009) compares the family finances of a sample of winners and losers in India's 2003/04 state elections.…”

“…While economists would view this as a reasonable first-hand approximation, this, of course, need not necessarily be true (one can easily imagine various non-pecuniary benefits) -in which case such approaches will offer a biased estimate of the total gain to being a politician. Moreover, studies comparing the income of elected politicians to a matched sample of non-representatives (e.g., Lenz and Lim 2009;Peichl et al 2011) may not be employing the most appropriate comparison group. Many of the non-representatives analysed may have had no political aspirations to begin with, which makes them differ from elected politicians in important -but possibly unobserved -ways.…”

Understanding the public sector pay gap

“…3 For some recent contributions to a fast expanding literature, see Giordano et al (2015), Depalo et al (2015), Lausev (2014), European Commission (2014), or Christofides and Michael (2013 and the references quoted therein. On related grounds, a strand of the literature looks at the "politicians' pay gap" (see in particular Peichl et al (2013), for the case of Germany). 4 See for instance Holm-Hadulla F et al (2010) Fernández-de-Córdoba et al (2012) or Kollintzas et al (2015).…”

Electoral cycles in MPs’ salaries: evidence from the German states

“…When politicians earn these private returns during an official political term, returns may influence parliamentary effort (Gagliarducci et al 2010, Arnold et al 2014, Geys andMause in press). See Peichl et al (2013) on how the salaries of politicians and private sector executives differ in Germany; Elliott et al (2005) compare the public and private sector pay in the United Kingdom. The education of voters and US governors' salaries have been shown to be negatively correlated (Mirhosseini 2016).…”